INVENTORY IMPROVEMENT BY USING CLASSIFICATION ANALYSIS AND ORDER QUANTITY MODEL BASED ON DEMAND CHARACTERISTICS: A CASE STUDY OF ELECTRONIC APPLIANCES MANUFACTURING
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Abstract
This research aims to apply the inventory management principles to solve the problem of total cost of excess inventory for an electronic manufacturing company. One of the component parts namely “power stage” is used for empirical study. Firstly, the inventory of component parts is classified based on ABC analysis technique. Next, the demand variation pattern of each part in group “A” is examined by using the coefficient variability value. Finally, the new purchasing policies have been established according to the demand variation characteristic of each component part. Based on demand variation characteristics, the Economic Order Quantity model is used for smooth demand while the Silver Meal heuristic is employed for high variation demands (erratic, lumpy and intermittent demand). The result of the new purchasing policies implementation shows 64.74 percent decrease in total excess inventory costs.
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